Crop diversification, downside risk exposure, and crop production in the Niger basin of Benin

This paper investigates the extent to which crop diversification affects farm productivity and production risk in the Niger basin of Benin. The paper relies on a moment-based approach, and estimates a stochastic production function which captures the effects of crop diversification on the mean, the variance, and the skewness by controlling for the unobservable heterogeneities related to institutional factors and village specific conditions. The findings reveal that diversification across crops affects positively the mean, the variance, and the skewness, with the effects being statistically significant only in the case of the mean. Thus, diversification is important in reducing the exposure to downside risk.